If you are considering investing in Bitcoin, there are a few things you need to know. This crypto currency has reached record highs in November, but has since fallen over 65% against the dollar. Its supporters argued that it would replace gold, which was losing value because of inflation and the turbulence in the global markets. While it is difficult to predict when a crypto currency will hit bottom, there are a few signs you should keep an eye on.
The first sign that a Bitcoin crash is imminent is the Dollar Index. The Dollar has recently climbed to a six-month high, which has caused a major drop in stock markets. Bitcoin has broken below its long-term triangle pattern. Support is expected at $24,000 and RSI has fallen below 30, marking a significant oversold zone. But what should you do if you already have Bitcoin? Should you hold it and wait for it to turn around?
The latest drop in the Bitcoin price is the result of a series of factors. The US Federal Reserve raised interest rates last week, discouraging risky investments and speculative trading. Meanwhile, a report released Friday showed that inflation was accelerating at a faster rate than previously thought. Because of this, Bitcoiners are dumping their holdings. As a result, the overall cryptocurrency market has dropped by nearly $2 trillion. The Bitcoin market is down about 20% this week compared to last week.
The price of Bitcoin has mirrored the Nasdaq’s since the start of the year. The Nasdaq is heavily weighted toward tech stocks, and Bitcoin represents roughly $600 billion of the entire index. Ethereum, the second-most valuable digital currency, has plunged by about 28 per cent this week and is currently trading at about $25,500. It is now 70 per cent below its high in November, when it was valued at almost $68,000 a coin.
Amid the current volatility, one of the largest Bitcoin holders is El Salvador. The country purchased $1.5 billion worth of the cryptocurrency in 2021, but its losses have since wiped out most of that investment. El Salvador’s government is also struggling with the national debt, and the IMF is pinning its loan offers on the country’s use of Bitcoin. There is also no foreseeable end to Bitcoin’s wild price fluctuations. Although the Bitcoin market is in a state of flux, experts say this is par for the course of cryptocurrencies.
Another factor contributing to the recent cryptocurrency market slump is China’s continued crackdown on cryptocurrencies. A recent report released by the Federal Reserve shows that US inflation has hit a 40-year high. While these aren’t direct causes, this trend has a lot to do with monetary policy and inflation in general. The Federal Reserve has also been boosting interest rates in order to combat inflation. Those factors are not the only factors that have contributed to the recent volatility in the market.